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Social Media Data Is Being Used to Calculate Student Loan Risk in the UK

Calculating risk is a complex process, particularly in the competitive student loans market. Basing decisions on potential earnings rather than current assets and income, as banks traditionally do, makes more sense when it comes to loaning to young people. Now, some companies are turning to social media, and checking out clients' connections, in order to assess the risk of the potential borrower, and also to put pressure on those who default.

Calculating risk is a complex process, particularly in the competitive student loans market. Basing decisions on potential earnings rather than current assets and income, as banks traditionally do, makes more sense when it comes to loaning to young people. Now, some companies are turning to social media, and checking out clients’ connections, in order to assess the risk of the potential borrower, and also to put pressure on those who default.

graduation

(Photo Credit: dewfall/Flickr)

Companies are collecting data to learn more about perspective borrowers. They are looking at your connections, for example, to determine whether or not you have a network in place that is likely to garnish financial rewards in the future.

Do You Know What You're Worth?

Cameron Stevens, chief executive of Prodigy Financial, says that the detailed data that’s available through social media can make it easier to finance some people who otherwise would struggle to be vetted. He said:

“Who someone connects to is relevant. If someone tells you they have worked for McKinsey and they are connected to 100 people who work for McKinsey, it’s likely that they have.”

There is also another side to this practice though:

“If you know all your defaulters are connected to a particular group of people, then you don’t want to lend to those people either.”

Given the fact that UK student loan organizations are using this data, it’s safe to expect companies here in the US will soon adopt similar practices — if they haven’t already. Either way, students would be wise to consider that the data they reveal through social media could be used in this way.

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How do you feel about student loan companies using social media data to assess risk? We want to hear from you! Leave a comment or join the discussion on Twitter.


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